Q1 GDP Highlights: Economy records worst ever quarter, shrinks 23.9%; construction halves, manufacturing free falls

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Updated: August 31, 2020 7:15:31 pm

Q1 GDP Highlights: India's GDP contracted by 23.9 per cent in the first quarter of the current fiscal, GVA shrank by 22.8 per cent.

Q1 GDP LIVE, indian economy, growth rate, economic growth in first quarter, agriculture, manufacturing, servicesacThe first quarter saw an unprecedented closure of shops, markets, and industries, which forced the wheels of the economy to a standstill.

Q1 GDP Highlights: India’s economy contracted by 23.9 per cent in the first quarter of the current fiscal. It is for the first time in 40 years when the GDP registered negative growth. While the construction activity halved in first quarter, the manufacturing sector had a freefall. GVA of mining shrank 23.3 per cent; manufacturing 39.3 per cent; and construction fell 50.3 per cent. All sectors except agriculture shrank in the first quarter. Agri GVA rose 3.4 per cent. While private consumption expenditure fell on-year, the government expenditure rose significantly. PFCE stood at 54.3 per cent of GDP, compared to 56.4 per cent last year; and GFCE shot up from 11.8 per cent to 18.1 per cent in Q1. With the latest data, there will be more clarity to assess the severity of the damage done to the economy by the coronavirus pandemic and how to look after the economic revival in the coming quarters. The first quarter saw an unprecedented closure of shops, markets, and industries, which forced the wheels of the economy to a standstill. Except for agriculture, almost all the corners of the economy were severely hit. 

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Highlights

    19:10 (IST)31 Aug 2020
    RBI will take steps to cool down the bond yields

    The monetary measures announced by RBI are in line with our expectations that the central bank will take steps to cool down the bond yields which have seen a spurt in the last few weeks. RBI had already announced one round of Operation Twist and another similar round by mid-September will take the aggregate volume of such operations to Rs 40,000 Cr. This will help to stabilize the bond yield curve which has suddenly become a bit steep. The increase of 2.5% in the HTM category from 19.5% to 22.0% for SLR securities will also enable banks to purchase additional government papers and also address the short term MTM concerns. - Acuité Ratings & Research 

    19:03 (IST)31 Aug 2020
    Sustainable recovery would depend on the time taken to contain the spread of virus

    With the economy unlocking in the last few months, most economic parameters have improved to 70-90% level of the corresponding period of the previous year. However, a sustainable recovery would depend on the time taken to contain the spread of virus. It is very important for consumer sentiments and consumer spending to improve for the economy to bounce back. Increased infrastructure investment by the government and demand boosting measures are much required at this point for the economy to recover. - Rajani Sinha, Chief Economist & Head Research at Knight Frank India.

    18:58 (IST)31 Aug 2020
    Positive agriculture growth is silver lining

    The sharp fall in the first quarter GDP is on expected lines given that around 70-80% of the economy was on a standstill in the first two months of this quarter. As expected Private Final Consumption Expenditure and Investments have contracted sharply in this quarter, while the positive agriculture growth has been the silver lining. - Rajani Sinha, Chief Economist & Head Research at Knight Frank India.

    18:50 (IST)31 Aug 2020
    India is still reeling under lockdowns

    Unfortunately, India is still reeling under lockdowns by various states and the consumption trends continue to remain lower. While the second-quarter number may be a little less negative than 1st quarter, the slow growth trend is likely to continue. - Raghvendra Nath, MD, Ladderup Wealth Management

    18:49 (IST)31 Aug 2020
    What's the choice for govt

    The choice for the government will be on whether the consumption or the investment side needs to be pushed. Given the limited fiscal space and the need to stimulate a more durable growth, the growth recovery will be gradual and is likely to continue into 1HFY22. - Suvodeep Rakshit, Vice President & Senior Economist at Kotak Institutional Equities.

    18:48 (IST)31 Aug 2020
    Growth may contract in all four quarters

    Going forward, given the gradual improvement in activity indicators (remaining well below pre-Covid levels), the growth recovery will be gradual and contracting for all quarters in FY2021. Further, growth recovery will also be hinged to the curb of the Covid spread and removal of even localized lockdowns. - Suvodeep Rakshit, Vice President & Senior Economist at Kotak Institutional Equities.

    18:46 (IST)31 Aug 2020
    Trough in economy was much lower than expected and the pickup will likely be more elongated

    The print indicates that the trough in the economy was much lower than expected and the pickup will likely be more elongated. The production side was pulled down by a deep contraction in manufacturing, construction, and trade, hotel, transport sectors while the expenditure side was clearly pushed lower by heavy contraction both in consumption and investment. - Suvodeep Rakshit, Vice President & Senior Economist at Kotak Institutional Equities

    18:40 (IST)31 Aug 2020
    Bond yields are expected to remain soft in immediate future

    Manufacturing is showing a strong slowdown of minus 39% yoy. Impact wise debt market was already happy with RBI measures during the day on omo plus htm plus term repo announcement. With GDP numbers expected to remain weak in the second quarter, inflation expected to decline and accommodative stance from RBI, the bond yields are expected to remain soft in immediate future. - Dinesh Pangtey, CEO, LIC Mutual Fund

    18:23 (IST)31 Aug 2020
    GDP growth is very likely to bounce back

    We have witnessed record kharif sowing amidst a good monsoon and there will also be a pent-up demand on the consumption side. The GDP growth is very likely to bounce back with the opening up of the economy and gradual subsiding of the COVID pandemic. - Mohit Ralhan, Managing Partner & CIO, TIW PE

    18:22 (IST)31 Aug 2020
    'It’s a forced contraction and not a structural one'

    The 23.9 per cent contraction in GDP of Q1-FY21 reflects the impact of COVID-19 in the lockdown months. Although, it is the worst recorder contractions, but the fact remains that it’s a forced contraction and not a structural one. - Mohit Ralhan, Managing Partner & CIO, TIW PE

    18:19 (IST)31 Aug 2020
    Q1 FY21 GDP print already priced in markets

    The Q1 FY21 GDP print is already priced in the markets. What needs to be looked at is the 2QFY21 GDP no. If that no is also on the negative side and on similar lines to 1Q FY21 GDP print, then we may see a correction. The current rally and euphoria has been on back of liquidity injected globally and in India. I will continue to be cautious and book profit and take money home and will look to take invested capital out of the market and ride on the profits. - Arjun Yash Mahajan, Head – Institutional Business, Reliance Securities.

    18:13 (IST)31 Aug 2020
    Tension brewing on the India China border is more concerning

    This contraction is on expected lines due to the Covid-19 lockdown, which brought the entire nation to a standstill for almost the entire 1QFY21. What is more concerning for the equity markets is the latest tension brewing on the India China border and also the new margin requirement for the retail investor, which requires the investor to put upfront 20% margin in form of cash or stock for both BUY or SELL order. - Arjun Yash Mahajan, Head – Institutional Business, Reliance Securities.

    18:11 (IST)31 Aug 2020
    Economic slippage worse than expected

    India's GDP contraction of 23.9 per cent worse than expected, Bloomberg poll suggested a contraction of 19.2 per cent.

    18:07 (IST)31 Aug 2020
    Agri estimates taken during Rabi season

    The first quarter estimates are based on agricultural production during Rabi season of 2019-20 (which ended in June 2020) obtained from the Department of Agriculture, Cooperation & Farmers’ Welfare.

    18:03 (IST)31 Aug 2020
    GDP estimates for Q2 FY21 to be released on 27 November

    The next release of quarterly GDP estimates for the quarter July-September, 2020 will be on 27.11.2020.

    18:02 (IST)31 Aug 2020
    GDP estimates released today can be revised

    The data challenges in the case of other underlying macro-economic indicators like IIP and CPI, used in the estimation of National Accounts aggregates, will also have implications on these estimates. Therefore, estimates are likely to undergo revisions for the aforesaid causes in due course, as per the release calendar, said MOSPI.

    18:00 (IST)31 Aug 2020
    GDP fell to Rs 26.9 lakh crore from Rs 35.35 lakh crore

    GDP at constant prices in Q1 FY21 is estimated at Rs 26.90 lakh crore, compared to Rs 35.35 lakh crore in the same period last year, showing a contraction of 23.9 per cent. Quarterly GVA at constant prices for Q1 FY21 is estimated at Rs 25.53 lakh crore, compared to Rs 33.08 lakh crore in Q1 FY20, showing a contraction of 22.8 percent.

    17:54 (IST)31 Aug 2020
    Govt expenditure shoots up; private expenditure shrinks

    While private consumption expenditure fell on-year, the government expenditure rose significantly. PFCE stood at 54.3 per cent of GDP, compared to 56.4 per cent last year; and GFCE shot up from 11.8 per cent to 18.1 per cent in Q1.

    17:51 (IST)31 Aug 2020
    Agriculture remains the only bright spot

    All sectors except agriculture shrank in the first quarter. Agri GVA rose 3.4 per cent.

    17:48 (IST)31 Aug 2020
    Construction activity halved in first quarter; manufacturing free falls

    GVA of mining shrank 23.3 per cent; manufacturing 39.3 per cent; and construction fell 50.3 per cent

    17:41 (IST)31 Aug 2020
    GDP nosedives in Q1

    GDP shrinks 23.9 per cent in Q1, GVA contracts by 22.8 per cent.

    17:33 (IST)31 Aug 2020
    Steel, cement on a downward trajectory

    Steel, cement output sees the steepest fall in July. Steel fell 16.4 per cent while cement shrank 13.5 per cent. 

    17:31 (IST)31 Aug 2020
    Contraction in core sectors continue

    Eight core industries continue to contract in July. The core sectors shrank 9.6 per cent.

    17:28 (IST)31 Aug 2020
    No extension for free food grains distribution

    No extension for free food grains distribution to migrants under Atmanirbhar Bharat, Govt officials told CNBC-TV18

    17:22 (IST)31 Aug 2020
    Fiscal deficit exceeds annual target in first four months

    Apr-July fiscal deficit 103.1 per cent of the Rs 7.96 lakh cr budget aim; July fiscal deficit at Rs 1.59 lakh cr.

    17:19 (IST)31 Aug 2020
    Recovery stalls after quick revival in June

    Timely indicators show that the post-lockdown recovery is now stalling, underscoring the long and difficult road ahead for India’s economy

    17:17 (IST)31 Aug 2020
    NSO data will be first benchmark of the state of Indian economy

    Observers of the Indian economy keenly await the NSO data because it will provide the first benchmark of the state of the Indian economy after the Covid-19 pandemic disrupted it and forced the country into widespread and repeated lockdowns.

    17:11 (IST)31 Aug 2020
    Q1 GDP data will help to plan near-future

    In the unavailability of the coronavirus vaccine, today's GDP data will help to take further steps to revive economy. 

    17:08 (IST)31 Aug 2020
    India faced coronavirus-led disruptions with a history of prolonged slowdown

    The impact of the coronavirus pandemic was deeper in India as the economy was already going through a prolonged slowdown for the last two fiscal years. 

    17:02 (IST)31 Aug 2020
    Manufacturing, services may see severe contraction

    Manufacturing and services sectors are likely to face a severe contraction in Q1. Lockdown restrictions and coronavirus cases made a significant impact in the growth of these sectors. 

    16:56 (IST)31 Aug 2020
    GDP contraction likely for first time in 40 years

    India's economy may contract for the first time in 40 years, making the path tough in the coming quarters too  

    16:48 (IST)31 Aug 2020
    India entered pandemic with a prolonged slowdown

    After hitting an annual growth of 8.2 per cent in Q4 FY18, the GDP of India is almost on a downward trajectory so far. Q4 of FY19 was the only exception when the GDP increased by 0.1 per cent from the previous quarter. In Q4 FY20, Indian clocked a GDP growth of a mere 3.1 per cent.

    16:46 (IST)31 Aug 2020
    Farm sector emerges as bright spot

    The agricultural sector has emerged as a bright spot. “Its prospects have strengthened on the back of good spatial and temporal progress of the south-west monsoon,” RBI said in the latest MPC minutes. The developments in the farm sector also had a salutary effect on rural demand as reflected in fertiliser production and sales of tractors, motorcycles, and fast-moving consumer goods.

    16:42 (IST)31 Aug 2020
    High hopes on agriculture sector

    Even as India’s manufacturing and services sector are likely to face a major contraction, the agriculture sector may expand in Q1.

    16:41 (IST)31 Aug 2020
    What do economists say?

    Aditi Nayar, Principal Economist, ICRA, said that Indian GDP has contracted by about 25 per cent in Q1 FY21. However, the SBI’s Ecowrap report raised its estimates for Q1 GDP growth from a contraction of 20 per cent to 16.5 per cent. Also, the Bloomberg poll suggested that Q1 GDP may contract by 19.2 per cent, and the economists at Care Ratings pegged it at a contraction of 20 per cent.

    16:33 (IST)31 Aug 2020
    How deep is India’s economic hole?

    Key economic indicators nosedived to record lows as India saw an unprecedented nationwide lockdown in the first quarter of the current fiscal, possibly leading to first GDP contraction in the last 40 years. However, a clear picture of the quantum of damage will emerge by today evening, when the government reveals the Q1 GDP and growth figures. The latest data will also clarify two major aspects — how much cushion has been provided by the agriculture sector, and the severity of the contraction in the manufacturing sector. Amid the weak demand, today’s data will also paint the true picture of India’s household consumption and expenditure. Read full story here

    16:29 (IST)31 Aug 2020
    Govt to reveal Q1 GDP growth figures soon

    The government is set to release the GDP growth figures of Q1 FY21 at 5:30 pm today. The data is expected to show a clear picture of coronavirus-led damage to the economy. 

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